New tax-efficient tech fund to invest in UK gaming, e-commerce and digital start-ups
Technology investment specialist Mercia Fund Management is launching a fund offering tax-efficient investment in the UK’s fast-growing digital economy.
The Mercia Digital Fund will use the hybrid structure of Mercia’s previous three tax efficient funds, combining the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS), to invest in a diversified portfolio of innovative digital companies with high growth potential.
Key sub-sectors within digital that the fund will target include:
· Fintech – financial technology – in which global investment has more than trebled during the past five years
· The Internet of Things (IoT) - focused around the interconnection of everyday devices through the internet, allowing automated data interaction
· E-commerce, which represents Europe’s fastest-growing retail market
· Gaming and gamification, in which game technology is used in non-game contexts.
The Mercia Digital Fund will target a compound annual growth rate of up to 50 per cent (excluding tax advantages) and investors can expect to realise their portfolios between three and seven years. The fund launches on 11 August and the minimum investment is GBP25,000 if investing via a financial intermediary or if taking regulated advice.
Mark Payton, managing director of Mercia Fund Management, says: “We believe there are a number of compelling reasons for launching a fund of this type in the current climate.
“First and foremost, digital is the UK’s fastest-growing sector and is already the third biggest contributor to the nation’s economy. The UK is undoubtedly among the world leaders in key digital industries such as fintech, e-commerce and the fast evolving gaming categories.”
“Figures from 2010 to November 2013 show investment returns in digital technology dwarfed other sectors, with 17 UK tech flotations with an average return of 101.7 per cent, compared with 1.8 per cent across 256 listings on the London Stock Exchange.
The tax advantages available through EIS and SEIS investments include initial tax relief of either 30 per cent or 50 per cent, loss relief and zero Capital Gains Tax on returns once qualifying shares have been held for three years.
“We think this combination of factors makes for an especially attractive proposition, particularly in light of the additional tax advantages available under EIS & SEIS which help to significantly offset the associated capital risk whilst enhancing prospective investment returns,” says Payton.
“Given the ability of the EIS/SEIS structure to convert a traditionally high-risk/return strategy into a moderate-risk/high-return opportunity, we believe this is one instance where backing Britain could prove very rewarding indeed.”
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